Covered Bonds

UniCredit’s German subsidiary, HVB, enjoyed a stunning investor reception for its negative yielding eight year Pfandbrief that was issued on Wednesday, thanks to the lack of supply this year, the small but rare premium on offer and the superb market conditions.

The European Central Bank is struggling to maintain its exposure to peripheral European covered bonds this year, due to falling issuance, and has therefore increased its exposure to core European markets. This trend is set to continue, as supply will remain muted — even though banks are running out of eligible collateral to pledge for repo funding.

Berlin Hyp took advantage of its flat covered bond credit curve and the steepness of the interest rate curve to issue a high yielding 12 year mortgage Pfandbrief on Tuesday, in a larger than usual size.

Commonwealth Bank of Australia's New Zealand subsidiary ASB Finance issued its largest covered bond on Tuesday, the first 10 year from New Zealand and the first covered bond from the country since January 2019.

SSA issuers are flocking back to the dollar and euro market this week after seemingly just pausing for breath over the last two weeks, when deals were thin on the ground with many of the top tier names well ahead on their funding rates. They will be hoping to match a trend from last week, where conditions approved across most markets.

Sparkasse Holstein has obtained a provisional rating from DBRS for its mortgage Pfandbriefe, though whether this leads to distributed issuance remains to be seen.

Aegon Bank has registered its soft bullet covered bond programme with the Dutch central bank and has published its base prospectus, suggesting it could be ready to mandate leads after posting results this week. Aegon follows NN Bank, which became the first Dutch bank to switch away from using conditional pass through (CPT) covered bonds, with Achmea Bank set to follow.

Commonwealth Bank of Australia’s New Zealand subsidiary, ASB Finance, has mandated leads for the first Kiwi covered bond since January 2019. At the same time, Berlin Hyp has appointed lead managers for a 12 year mortgage Pfandbrief.

Crédit Agricole has promoted four staffers to fill vacant and newly created positions in its debt capital markets leadership team, including global head of financial institutions DCM and head of European corporate DCM.

Green covered bonds no longer have to be reinvented in the face of rising sustainability-linked issuance because banks are now safe in the knowledge that they comply with the EU’s Taxonomy of Sustainable Activities.

DNB Boligkreditt and Sparebank 1 Boligkreditt (Spabol) issued deals flat to their curves with strong demand this week, while Bawag brought the first Austrian transaction through mid-swaps in almost three years.

Covered bond spreads look well supported for the next few months, traders said this week. But concerns that the European Central Bank may begin tapering purchases just as the European Union ramps up issuance is causing some concern for the longer term.